Tesla is offering rare discounts on its two best-selling models in the US through the end of the year, an indication that demand for its electric vehicles is slowing.
The Texas-based company began offering a $3,750 incentive on its website earlier this month for its Model 3 sedan and Model Y SUV, but yesterday doubled the discount to $7,500 for those , which will be delivered by December 31st.
The move precedes a new U.S. federal tax credit of up to $7,500 that is scheduled to take effect Jan. 1. Teslas were not eligible for a previous federal tax credit program because the company had reached a limit of 200,000 vehicles sold. Next year’s credits have no such limit.
“This is a sign of a slump in demand and doesn’t bode well for Tesla heading into December’s year-end,” Wedbush analyst Dan Ives said in an email. “EV competition is increasing across the board, and Tesla sees some demand headwinds.”
Low-priced versions of the Model 3 and Y are eligible for the federal tax credit in January due to restrictions on vehicle purchase prices set by the Inflation Reduction Act.
Without the discounts, the Model 3 starts at just over $48,000 including shipping, while the Y has a starting price of just over $67,000. To be eligible for the federal tax credit, vehicles must not have a sticker price exceeding $55,000 for sedans and $80,000 for trucks and SUVs.
In a regulatory quirk, many vehicles like Teslas made in North America will likely be eligible for the full $7,500 tax credit from January through March, as the US Treasury Department is still working on regulations that would require battery minerals and parts must come from North America. It’s likely that most vehicles will only be eligible for half the credit once the rules come out in March.
Tesla may offer the rebates on Juice sales before the end of the year to fulfill a promise to increase vehicle sales by 50 percent.
On the third-quarter earnings conference call in October, Tesla CFO Zachary Kirkhorn said Tesla will narrowly miss its 50 percent revenue growth target. But he was later contradicted by CEO Elon Musk.
Musk forecast annual production and delivery growth of 50 percent, but also pointed to logistical problems with shipping vehicles.
To meet its 50 percent revenue growth goal, Tesla needs to excel in the fourth quarter.
Through September, the company delivered 908,573 vehicles, compared to just over 936,000 vehicles a year earlier.
To increase sales by 50 percent year over year, which would equate to about 1.4 million vehicles, the company would need to sell more than 490,000 vehicles in the fourth quarter.
Industry analysts polled by data provider FactSet expect Tesla to deliver 431,000 vehicles in the fourth quarter and end the year with 1,341 million.
Tesla shares have lost more than 60 percent of their value since Mr Musk announced in April that he had taken a large stake in Twitter.
